ICAEW CFAB - Accounting - Chapter 7 Quiz

Which of the following is the correct calculation for cost of sales?

• A Sales – opening inventory – purchases + closing inventory – delivery inwards

• B Opening inventory + purchases + closing inventory + delivery inwards

• C Opening inventory + purchases – closing inventory + delivery inwards

• D Sales – opening inventory + purchases - closing inventory + delivery inwards

Cost of sales is £14,000. Purchases for the period are £14,000, delivery inwards is £1,000, delivery outwards is £1,500 and closing inventory is £13,000. What was the opening inventory figure?

• A £10,500

• B £11,500

• C £12,000

• D £13,000

Carlisle has the following inventory movements during May (refer image).

Requirement

Assuming that the business values inventory on a FIFO basis, what will be the value of closing inventory at the end of the month?

• A £1,615

• B £1,655

• C £1,700

• D £1,705

A trader used the LIFO method to value inventory at the end of July at £3,110. Sales and purchases in July were as follows (refer image).

The opening inventory at 1 July was 50 units valued at £15 per unit. The trader needs to adopt the FIFO method.

Requirement

What is the effect of this change on the trader’s profit?

• A £190 decrease

• B £420 decrease

• C £420 increase

• D £190 increase

The inventory records for Simmons last month were as follows (refer image).

Opening inventory was 600 units valued at £12,000. Purchases in February were at £31.25 per unit.

Requirement

The total cost of sales in February, using the AVCO method, is (to the nearest £):

• A £37,000

• B £28,000

• C £17,625

• D £22,000

What would be the effect on a business’s profit of discovering that inventory with a cost of £1,250 and a net realisable value of £1,000 had been omitted from the inventory count at the end of the reporting period?

• A An increase of £1,250

• B An increase of £1,000

• C A decrease of £250

• D No effect

June Ltd has three lines of inventory at the end of its reporting period (refer image).

Requirement

What is the carrying amount of inventory in the financial statements at the end of the reporting period?

• A £2,700

• B £2,325

• C £2,300

• D £2,100

Brecon manufactures cosmetics and toiletries. It has decided to repackage its body lotion product in new covers and discount the selling price.

The details of body lotion are as follows (refer image).

Requirement

At what amount should each item of body lotion be included in inventory?

• A £3.00

• B £2.70

• C £2.25

• D £1.95

During the reporting period Morgan took items with a selling price of £280 for their own use.

Morgan trades at a 40% mark-up and had a draft profit of £15,800 before making any adjustments for this matter. The adjusted profit is:

• A £15,520

• B £15,800

• C £15,600

• D £16,000

ReadIt Co is a book wholesaler. Commission of 4% on selling price is payable by ReadIt Co for each sale.

The following information is available in respect of total inventory of three of his most popular titles at the end of his reporting period (refer image).

Requirement

What is the total carrying amount of these inventories in ReadIt Co’s statement of financial position?

• A £7,368

• B £7,400

• C £7,560

• D £7,640